Fred Goodwin and HBOS' Andy Hornby summoned in Holyrood inquiry

The bosses who led Scotland's two greatest banks to the brink of bankruptcy will be summoned before a Holyrood inquiry to explain their actions.

By Simon Johnson, Scottish Political Editor

6:19PM GMT 20 Jan 2009

Sir Fred Goodwin, former chief executive of Royal Bank of Scotland (RBS), and Andy Hornby, his former counterpart at Halifax Bank of Scotland (HBOS), will be asked to give evidence to the investigation.

RBS this week posted the biggest loss ever recorded by a UK company, £28 billion, while its share price has plummeted from more than 600p two years ago to less than 12p.

The Government this week increased its stake in the bank to 68 per cent, with many banking experts predicting it will be nationalised shortly.

Meanwhile, the Bank of Scotland has been swallowed up by Lloyds Banking Group, ending more than 300 years of history, after becoming overexposed in the sub-prime mortgage market.

Scottish Labour led calls for an investigation to hold those responsible to account and learn lessons for the future.

This won the backing of the other parties, and Holyrood's economy, energy and tourism committee is expected to begin discussing the remit and timetable at its meeting next week.

Its members can compel witnesses to appear before them if the subject matter is devolved and they live in Scotland.

As some economic powers are devolved and Sir Fred has a home in Glasgow, he may be forced to give evidence. It is unclear whether Mr Hornby can refuse.

John Park, Scottish Labour spokesman for the economy and skills, said: "It is frankly offensive that many of the men responsible for bringing Scottish banks to the brink of collapse are walking away as multi-millionaires.

"Thousands of hard working families are facing unemployment as a result of their mismanagement, and MSPs should hold them to account."

Under Sir Fred's leadership, RBS gobbled up 26 other companies in just seven years to become the fifth largest bank in the world.

But this left the bank over-exposed on the sub-prime mortgage market and its fate was sealed with the disastrous £49billion takeover of ABN Amro, the Netherlands' largest bank.

About 30,000 staff work in Scotland's financial sector, with HBOS staff in particular worried about job cuts resulting from the Lloyds takeover as backroom operations and branches merge.

Many also had been encouraged to take advantage of share options in the past and have now seen their savings plummet in value.

Mr Hornby gave up his right to a payoff when he left HBOS but is acting as a consultant to Lloyds Banking Group.

The other parties said they supported an inquiry but the Tories and Nationalists claimed the Prime Minister and Chancellor of the Exchequer should also be forced to appear.

Gavin Brown, Scottish Tory enterprise spokesman, said: "If there is to be any investigation by any committee at Holyrood then the two principal architects for the perilous state of the British economy Â Gordon Brown and Alistair Darling Â should also be called to give evidence."

Tavish Scott, Scottish Liberal Democrat leader, welcomed the inquiry, but said it makes more sense to hold a joint inquiry with Westminster into the future of Scottish banking.

This has been rejected by John McFall, the Labour chairman of the Commons Treasury select committee, which is carrying out its own probe into banking crisis.

A RBS spokesman refused to comment on the inquiry, pointing out the bank has a new chief executive and saying it was a matter for the individuals concerned. Lloyds Banking Group declined to comment.